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Re: Why do we need more taxes?

Originally Posted by SgtPeppers

There is no objective definition, but I would say "good" things are generally things which help the economy (income and profits), whereas "bad" things are things we want to discourage or at least make people try to minimize, for example if people drive less they produce less air pollution and smog, which I think it can be reasonably assessed as "bad".

What about homosexual activity? There is certainly a large portion of the country, and at one point it was the vast majority, that would define that as "bad." Should we tax it then?

Originally Posted by Sigfried

Depends, I don't usually like those as they are weighted to end consumers and they get used to hide income under the egis of business expenses that are in truth personal accommodations.

Ah, I'm assuming you are refering to Perks? Thats a new objection I hadn't heard before, nice.

I'm not sure it would really be a problem though. Companies would still have to pay the tax on end-use goods, since they aren't part of the method of production.

Originally Posted by Sigfried

It wouldn't be a long list of deductions, just one, if you taxes would take you below the poverty level you don't need to pay them. Taxing the poor is what tyrants do. I don't want to be a tyrant.

Its called having skin in the game and makes good economic sense. Any situation where people can choose to up consumption and bear zero cost of that decision is going to be a problem.

"Suffering lies not with inequality, but with dependence." -Voltaire

"Fallacies do not cease to be fallacies because they become fashions.” -G.K. Chesterton

Re: Why do we need more taxes?

What about homosexual activity? There is certainly a large portion of the country, and at one point it was the vast majority, that would define that as "bad." Should we tax it then?

No, first because it seems objectionable to do so, but secondly becauseI don't thing you could. To my knowledge, there are only really 2 ways commonly used to tax people (unless you count fines as a form of taxation). The first is an income or corporate tax, which takes a certain percent off of income or profits which is paid to the gov't. The other is an additional tax added on top of a product purchase or payment. I legitimately have no idea how you would tax an activity in which no transaction occurred. Also, homosexual activity has no byproducts to be discouraged. The other things I have cited do, gasoline adds air pollution and smog, cigarettes are toxic to both users and those around them, have as tendency to kill their users (I think it is something like 2 thirds) and put a strain on healthcare systems already struggling to care for aging populations. Both of those have secular value if they are mitigated, whereas the objections to homosexuality are not secular and should thus be outside the realm of gov't anyways.

Re: Why do we need more taxes?

Originally Posted by SgtPeppers

No, first because it seems objectionable to do so,

Because it feels objectionable to you? One level of objectionable would prevent a "bad" from being taxed? If the majority of people in the country voted it as a "bad" action, would that be enough? What about 60%? 90%?

Originally Posted by SGTPeppers

but secondly becauseI don't thing you could. To my knowledge, there are only really 2 ways commonly used to tax people (unless you count fines as a form of taxation). The first is an income or corporate tax, which takes a certain percent off of income or profits which is paid to the gov't. The other is an additional tax added on top of a product purchase or payment. I legitimately have no idea how you would tax an activity in which no transaction occurred.

The government taxes activity all the time, tolls on driving, fees associated with engaging with businesses associated with the activity, etc.

However, it is largely irrelevant, the point isn't whether this is practical, its whether it is moral.

Originally Posted by SGTPeppers

Also, homosexual activity has no byproducts to be discouraged. The other things I have cited do, gasoline adds air pollution and smog, cigarettes are toxic to both users and those around them, have as tendency to kill their users (I think it is something like 2 thirds) and put a strain on healthcare systems already struggling to care for aging populations. Both of those have secular value if they are mitigated, whereas the objections to homosexuality are not secular and should thus be outside the realm of gov't anyways.

Not true, homosexuals have a higher STD rate, higher domestic violence rate and they tend to live much shorter lives than cigarette smokers. I'm sure groups in favor of our mythical tax would also create some argument about the structure of society as well, etc. Either, way I'm not here to advocate for or against a homosexual lifestyle, only to point out that plenty of people object to the activity, they could certainly find some tangible negative that they would use, and enact a tax on something they defined as bad.

So we again return to the same question, exactly who defines what is "bad" and should be taxed?

"Suffering lies not with inequality, but with dependence." -Voltaire

"Fallacies do not cease to be fallacies because they become fashions.” -G.K. Chesterton

Re: Why do we need more taxes?

Ah, I'm assuming you are refering to Perks? Thats a new objection I hadn't heard before, nice.

I'm not sure it would really be a problem though. Companies would still have to pay the tax on end-use goods, since they aren't part of the method of production.

They still do it all the time these days. Every time I go on a trip all my meals and such are paid for, I've seen plenty of trips to clubs put on company tabs and that becomes a production expense rather than consumption. Many a rich person uses the company jet to go everywhere because they do business everywhere.

I think if you are simplifying the code to get rid of the games of what is taxed and what is not... go all the way and just make everyone pay on every transaction, get out of the business of deciding what is taxed and what is not.

Its called having skin in the game and makes good economic sense. Any situation where people can choose to up consumption and bear zero cost of that decision is going to be a problem.

You are right to an extent. I can see a kind of token poor tax that is a fairly low fixed amount. But I've been working poor and I can tell you that the margin is tiny between affording a place to live and very very basic food or becoming a charity case. The value of having a stake in the game vs just making a basic living for yourself to me is weighed heavily in the latter.

For simplicity, if you have a VAT style tax, they will end up paying it on consumer goods, but we will also end up returning it too them on programs of one kind or another.

It is fundamentally different. If the income is something I get to take home for my personal use then that is one thing.

All everything is personal use. Human beings don't work for galactic overlords or the good of the earth. We work to make things for ourselves. There is immediate vs long term consumption, but it is all consumption of one kind or another.

If the income is not accumulated as personal wealth but invested into a vehicle for building the economy (such as business capital) then placing a tax on it simply reduces the effectiveness of the business.

No, because the purpose of business is not to just make more business but to make goods for consumption. The reason for business is not to accumulate a ledger somewhere, its to make goods that are ultimately consumed by human beings. Where do you think that vast pool of investment money out there comes from? It comes from individual consumers who take excess money and invest it. If you channel all the labor market's money into consumption and they pay all the costs, you will only dry up that side of the investment pool and leave yourself with only a special class of capital holders who pay none of the tax and yet reap the lions share of the reward. You can start to see what that looks like in our economy where trying to make a living by labor is a fools game and all the real profit is just in finance which itself is something of an illusion of suddenly demand falls out... because the bulk of the population has no good way to make money on their labor.

Its a bad formula. Investment is great but labor and consumption are the cornerstones on which capital operates. A factory without workers is just a husk and a product without a consumer is just trash. This philosophy has made the tool (capital) the stated goal. The real goal is for people to have the things they need and want, capital is a tool to get that and to make the labor far more efficient. Taxing it will not kill its productivity and thus will not kill the true incentive for it.

We should simply tax all aspects of the economy equally to avoid artificially distorting the value of things.

It is not helping the unemployed since they could use the jobs that company will forgo in order to fulfill their tax burden.

Nor would it be to tax consumption because then the consumers, who drive demand for goods won't buy as much. There is no one end of the equation you can isolate. The best option is always to simply apply things as evenly as you can.

It will not go into R & D of any kind. Taking personal income tax has the same effect, but based on economy of scale, the effect is significantly less. Owners of capital still have income that is taxable.

The problem is owners of capital find ways to hide their income as capital when it actually is not capital. We need to stop all this gamesmanship as best we can.

Re: Why do we need more taxes?

Originally Posted by Sigfried

They still do it all the time these days. Every time I go on a trip all my meals and such are paid for, I've seen plenty of trips to clubs put on company tabs and that becomes a production expense rather than consumption. Many a rich person uses the company jet to go everywhere because they do business everywhere.

They plane might well be considered a corporate expense rather than perk I will grant that. I wonder how much of a difference that would really make.

The dining would still be taxed since it is a consumption good under the plan I'm referencing (FairTax). Even if your company is paying for it, they are paying for it as a taxed final good, not an intermediary step. I would also check you W-2, I travel for work as well and get a corporate card, most of that reimbursable amount is defined as taxable income by the IRS btw.

Originally Posted by Sig

I think if you are simplifying the code to get rid of the games of what is taxed and what is not... go all the way and just make everyone pay on every transaction, get out of the business of deciding what is taxed and what is not.

That is a decision on what is taxed and what is not as well and it would tend to exacerbate high finance goods and long term investment. That style of tax code would tend to exacerbate the boom/bust cycle by artificially decreasing the interest rate. IE your return on long term capital investments is lower because they are taxed at higher rates. Things like industrial machinery would bet taxed higher per dollar than simple merchandise or service goods.

The end user consumption tax avoids that bias by simply taxing ROIC rather than skewing return rates toward the short term.

Originally Posted by Sig

You are right to an extent. I can see a kind of token poor tax that is a fairly low fixed amount. But I've been working poor and I can tell you that the margin is tiny between affording a place to live and very very basic food or becoming a charity case. The value of having a stake in the game vs just making a basic living for yourself to me is weighed heavily in the latter.

Yep, I grew up there too in Mill Creek (where costs are high when your mom is secretary), I think a flat tax rate or the FairTax would be an easy way to solve that problem. The latter wouldn't tax anything up to the poverty line (which is an issue I have with it, that makes it trendy to screw with that definition then). It would also incentivize the working poor to vote down any increases in federal spending because they couldn't afford it.

"Suffering lies not with inequality, but with dependence." -Voltaire

"Fallacies do not cease to be fallacies because they become fashions.” -G.K. Chesterton

Re: Why do we need more taxes?

Originally Posted by Sigfried

All everything is personal use. Human beings don't work for galactic overlords or the good of the earth. We work to make things for ourselves. There is immediate vs long term consumption, but it is all consumption of one kind or another.

It is not equivalent. If business X earns 100 million dollars and the corporate tax is 30 percent, then the owner of that business is immediately taxed 30 million dollars. Then the owner takes home, say 10 million per year. He already paid 30 million. Now, he will be pay another 2-4 million. Now, if he really wants to take home 10 million, he will probably take 15 million and then take home about 11 or 12 million. So, now he has to use the remaining money for capital, R & D, advertising, labor, sales, etc. Rather than having 100 million - his 10 million pay (or about 90 million), he has 45 million for these endeavors. Notice that the owner isn't likely to feel the hit of high corporate taxes. Rather, his employees will feel it as he will pay them less. The business' long-term growth will be stymied. Less new labor will be employed. Plus, a significant amount of the money has been double taxed since the owner is taxed for his income as well as every single employee. After all their pay comes from the money that was already taxed at the corporate rate. Although, as a percentage, they feel it much less than the owner, himself, feels it. So, when you say there is no difference, you are significantly mistaken. I alluded to this earlier, but you completely ignored it. The reason personal income tax is far different is due to economy scale. A single person making a 20-50 dollars less per week is much less significant than a company earning millions less per week in terms of the effect of the economy. The average middle class person does not employ people, doesn't invest in R & D, etc. I should also point out that I don't believe anyone needs to be taxed at a higher rate.

Originally Posted by Sigfried

No, because the purpose of business is not to just make more business but to make goods for consumption. The reason for business is not to accumulate a ledger somewhere, its to make goods that are ultimately consumed by human beings. Where do you think that vast pool of investment money out there comes from? It comes from individual consumers who take excess money and invest it. If you channel all the labor market's money into consumption and they pay all the costs, you will only dry up that side of the investment pool and leave yourself with only a special class of capital holders who pay none of the tax and yet reap the lions share of the reward. You can start to see what that looks like in our economy where trying to make a living by labor is a fools game and all the real profit is just in finance which itself is something of an illusion of suddenly demand falls out... because the bulk of the population has no good way to make money on their labor.

We should simply tax all aspects of the economy equally to avoid artificially distorting the value of things.[/QUOTE]
Business is merely a word that implies making consumable goods. Money is a representation of one's labor. I am not suggesting anyone is treated specially. I am suggesting we stop double-taxing money for everyone.

Nor would it be to tax consumption because then the consumers, who drive demand for goods won't buy as much. There is no one end of the equation you can isolate. The best option is always to simply apply things as evenly as you can.

The problem is owners of capital find ways to hide their income as capital when it actually is not capital. We need to stop all this gamesmanship as best we can.[/QUOTE]

The U.S. is currently enduring a zombie apocalypse. However, in a strange twist, the zombie's are starving.

Re: Why do we need more taxes?

Originally Posted by Squatch347

They plane might well be considered a corporate expense rather than perk I will grant that. I wonder how much of a difference that would really make.

I'm not sure, but its clear to me that the flat sales tax proposals would greatly insensitive people to use this technique as much as possible. I know I would likely get a business licence and sift as many of my personal needs through it as possible. right now there is no good reason since most of my tax is income which is not related to things I do at home. But if it were based on sales, I could turn a lot of my hobbies into a business (which many already are in essence) and save a lot of taxes on those goods related to them.

The dining would still be taxed since it is a consumption good under the plan I'm referencing (FairTax).

I've read the fair tax and so long as a business is the buyer and documents it as such, no tax. It takes great pains to make sure any business to business transaction, whatever the good, is not taxed. Currently with sales taxes business must pay the cost if the good is not an end product, aka they don't re-sell it but in the "fair" tax they don't do that. That plan is a huge loophole in the disguise of a flat fair tax. What it really is, is a giant dodge for anyone who owns a business.

I would also check you W-2, I travel for work as well and get a corporate card, most of that reimbursable amount is defined as taxable income by the IRS btw.

Yes but it only comes off my income which is where most of my tax is paid. So even if I claim my work travel, its not like I get all that much back. But if all tax is sales, then I can dodge a lot more of it.

That is a decision on what is taxed and what is not as well and it would tend to exacerbate high finance goods and long term investment.

No, it doesn't. VAT taxes only tax out on whatever you are gaining in the transactions and only at the time of exchange. Long term investments pay tax when they pay out and high finance goods (not sure exactly what you mean) but basically if you are just moving things around are not taxed that much, its when you add value that you pay out a % on the value added.

That style of tax code would tend to exacerbate the boom/bust cycle by artificially decreasing the interest rate. IE your return on long term capital investments is lower because they are taxed at higher rates. Things like industrial machinery would bet taxed higher per dollar than simple merchandise or service goods.

I have no idea where you get that impression, can you explain? So far as I know none of that is true.

It would also incentivize the working poor to vote down any increases in federal spending because they couldn't afford it.

I don't think so. They would have greater incentive to vote for programs that directly make payments to them as those would outpace whatever taxes they pay.

It is not equivalent. If business X earns 100 million dollars and the corporate tax is 30 percent, then the owner of that business is immediately taxed 30 million dollars. Then the owner takes home, say 10 million per year. He already paid 30 million. Now, he will be pay another 2-4 million.

It doesn't work like that. If you own the business, then there is no salary for you, or at least not if you are smart about it. Its your business, whatever it owns, you own. You don't pay tax twice on it as its finances are your finances. What you can do is use its losses to offset other sorts of income you may have, that is why people sometimes start businesses designed to loose money as sole proprietorship. If you own a business and you take 100K from the business bank account, you have not made a dime of income. You already owned that 100K. Those business do not file their own taxes then file taxes for the owner's income (at least not at the federal level). The individual files taxes and his business is part of his finances.

So, when you say there is no difference, you are significantly mistaken.

I believe you are in this case. What you are describing is closer to corporate taxes. In a corporation the finances are an entity unto themselves. The people paid salaries are not owners (or at least that is not why they get a salary unless the organization is corrupt). The owners of the company have no claim on the actual assets of the company itself, instead they get paid out money from the company as dividends. Yes, that has essentially already been taxed but so has money that I earn and then buy something from you with. The idea that a corporate owner is somehow the same pool as the corporation he owns is a misconception. The two are separate entities and one is paying the other. In this case the corporation is paying the owner for their investment capital. The corp pays money on their income, the stockholder pays money on their income and workers pay money on their income.

I alluded to this earlier, but you completely ignored it.

I didn't realize you held this misconception.

The reason personal income tax is far different is due to economy scale. A single person making a 20-50 dollars less per week is much less significant than a company earning millions less per week in terms of the effect of the economy.

Yes, because companies aren't made up of single people. A fair comparison is to compare 500 people to a single company and then the economic impact is quite similar. Companies are made of people, just like governments. Its weird to me that folks don't seem to get that. Its like governments and companies are magical beasts or something. They are simply collections of individual human beings working together to common purpose. Cooperation has benefits, of that there is little doubt.

The average middle class person does not employ people, doesn't invest in R & D, etc. I should also point out that I don't believe anyone needs to be taxed at a higher rate.

You are wrong. The average middle class person does all those things. Where do you think a lot of the massive investment capital comes from? It comes from pensions, and savings accounts, residential equity, privately held bonds and so on. They do not directly make the decisions but they supply the work that is represented as money and then given to others so they can spend it wisely and return the profits.

Business is merely a word that implies making consumable goods. Money is a representation of one's labor. I am not suggesting anyone is treated specially. I am suggesting we stop double-taxing money for everyone.

No one is being double taxed. Think of each person and corporate entity as a bubble. Taxes happen when money goes into or out of that bubble. Proportions and their stock holders are in separate bubbles intentionally. Privately owned businesses are inside their owners bubble. Each worker has a bubble and is paid through the bubble of the corp or the business owner. No one is double taxed here. You have a false impression of where the money borders are. Private business owners and corporate managers are probably pretty happy about that as they would love to find ways to move money from one owner to another without having to pay tax on it.

Re: Why do we need more taxes?

Originally Posted by Squatch347

Because it feels objectionable to you? One level of objectionable would prevent a "bad" from being taxed? If the majority of people in the country voted it as a "bad" action, would that be enough? What about 60%? 90%?

I this case, objectionable means you are discriminating against a specific group, whose lifestyle does not have byproducts which affect the general public.

The government taxes activity all the time, tolls on driving, fees associated with engaging with businesses associated with the activity, etc.
However, it is largely irrelevant, the point isn't whether this is practical, its whether it is moral.

First, I think tolls on driving would fall under a usage tax, because you are paying to use and maintain the road. I would say that any debate in regards to taxes would have practicality as a legitimate concern, even though it isn't the primary one.

Not true, homosexuals have a higher STD rate

I believe that is true in some cases. Gay men do have higher occurrences of HIV (though I have never seen stats on other STDs), but if I recall, lesbians have a level that is far lower than the general population, because there is not much fluid transfer, so that might counter the high levels on the other side.

higher domestic violence rate

I googled this and couldn't find any scholarly sources which said it was true (the first results were from conservapedia and the rest either did not cite studies or did not say how the studies account for discrepancies that tend to occur when dealing with small sample sizes (where the margin for error is likely higher))

they tend to live much shorter lives than cigarette smokers.

I looked into this and found that there is good reason to doubt its veracity, it is apparently a fabrication by some right wing "Doctor" (by the name of Paul Cameron, whose methodology has been condemned as sloppy) who used the smaller percentage of people over 60 who identify as homosexual to postulate that they die young. T^here appears to be a lack of data to support the life expectancy claim

Note: these are just FYI points, I don't plan to turn this into a debate on homosexuality.

So we again return to the same question, exactly who defines what is "bad" and should be taxed?

As I have said, there is no objective definition, but I can list a few criteria.
1. It must be detrimental to society
2. It must be detrimental in a secular consideration
3. It must not be labeled bad if it openly discriminates against people for their nature

The gov't is an arbitrator and if something meets these, I think a tax on it becomes reasonable.

Re: Why do we need more taxes?

Originally Posted by Sigfried

I'm not sure, but its clear to me that the flat sales tax proposals would greatly insensitive people to use this technique as much as possible. I know I would likely get a business licence and sift as many of my personal needs through it as possible. right now there is no good reason since most of my tax is income which is not related to things I do at home. But if it were based on sales, I could turn a lot of my hobbies into a business (which many already are in essence) and save a lot of taxes on those goods related to them.

Right, but of course you couldn't do that since most of those goods would already be final "end" goods right? And I'm not sure who you could continue to extract equity out of the company in this manner without it being automatically defunct. Not to mention you would then incur the cost of filing financial statements.

Originally Posted by Sig

I've read the fair tax and so long as a business is the buyer and documents it as such, no tax. It takes great pains to make sure any business to business transaction, whatever the good, is not taxed. Currently with sales taxes business must pay the cost if the good is not an end product, aka they don't re-sell it but in the "fair" tax they don't do that. That plan is a huge loophole in the disguise of a flat fair tax. What it really is, is a giant dodge for anyone who owns a business.

Since business purchases are not taxable, how does the FairTax keep individuals from pretending to have a business so they can buy things tax free?

The FairTax has several features that make it difficult and very risky for persons to have a scam business in order to purchase items tax free. First, in order for any person to purchase items tax free for business purposes, the business has to be a registered seller and possess a registered seller certificate issued by the state sales tax authority. Registered sellers are expected to file monthly or quarterly sales tax returns with the state (depending on sales volume). The certificate enables the business to purchase tax free from wholesale vendors, but the vendor must retain a copy of the registration certificate to justify not having collected tax on the sale. When a business purchases items for business use from a retail vendor, they have to pay the tax on the purchase and take a credit against the tax due on their monthly sales tax return. They must keep invoices/receipts to document what they purchased and the amount of the purchase. They might also make note of the purpose of the purchase on the invoice.

Also, as registered sellers, they are subject to the possibility of being audited by the state. During such an audit, they will have to produce the invoices for all the “business purchases” that they did not pay sales tax on and will have to be able to show that they were bona fide business expenses. If they cannot prove this, then they will have to pay the taxes that should have been paid when the items were purchased, plus interest and penalties. The probability of being audited will be much greater than it is under the current system with its over 140 million tax filers. Under the FairTax, there will be less than 20 million businesses that will be filing sales tax returns and thus subject to the possibility of being audited. Thus, the probability of tax cheats getting caught will be much greater than it is today, making tax evasion riskier than it is today. Additionally, while the FairTax has much stronger taxpayer rights than does the current tax system, the FairTax legislation provides for a number of fines and penalties for noncompliance. It also authorizes a mechanism for reporting tax cheats and obtaining a reward. An example would be 1-800-TAX-CHET.

Another potential scam would be to have a “fake” family business in order to buy things for family members tax free. The FairTax has a specific provision to prevent this. Although it does not prohibit businesses from providing taxable property or services as gifts, prizes, rewards, or as remuneration for employment, the gift, reward, etc. is considered to be the conversion of property or services from business use to personal use and is therefore taxable. Likewise, there is a similar provision to prevent abuse of employee discounts. Under the FairTax, employer-provided employee discounts over 20 percent are taxable. The term “employee discount” means an employer’s offer of taxable property or services for sale to its employees or their families for less than the offer of such taxable property or services to the general public. If the employee discount amount exceeds 20 percent of the price to the general public, then the sale of such taxable property or services by the employer to the employee is considered the conversion of property or services to personal use and is subject to tax. The taxable amount is the amount by which the discount exceeds 20 percent of the price to the general public.

Originally Posted by Sig

Yes but it only comes off my income which is where most of my tax is paid. So even if I claim my work travel, its not like I get all that much back. But if all tax is sales, then I can dodge a lot more of it.

I'm not sure I was clear. That amount they reimburse you for travel is added as gross taxable income to your tax return. So instead of making your salary, you made your salary+reimbursements. So you are taxed on that reimbursement as if it were part of your original income.
I'm not sure how you could "dodge" that under a consumption system.

Originally Posted by Sig

No, it doesn't. VAT taxes only tax out on whatever you are gaining in the transactions and only at the time of exchange. Long term investments pay tax when they pay out and high finance goods (not sure exactly what you mean) but basically if you are just moving things around are not taxed that much, its when you add value that you pay out a % on the value added.

That's a bit simplistic. Think of it this way. I can invest my $100 in two different projects. Project A is a capital investment on a piece of machinery that will begin operating next month expected return of X. Project B is a raw material manufacturer, say a steel mill, that will come online also next month and will have the same expected return, X. Which is a better investment? Currently, both are equally desirable, under a VAT, Project A wins because Project B's IRR is lower. That is a fundamental shift in the investment incentives and will by definition lead to some mal-investment. It is the exact same mechanism described by Mises, Hayek and Freidman when describing the bubbles created by cheap credit from the Fed. You favor short term or immediate pay-off projects over longer term investments.

Originally Posted by Sig

I don't think so. They would have greater incentive to vote for programs that directly make payments to them as those would outpace whatever taxes they pay.

How is that different from now except that they will have to bear some of the increased cost when now they bear none?

Originally Posted by Sig

It doesn't work like that. If you own the business, then there is no salary for you, or at least not if you are smart about it. Its your business, whatever it owns, you own.

Actually that defeats the purpose of having a seperate business entity at all. In your example, whatever it owes, you owe, meaning if the company fails they can take your savings, your house and your retirement.

"Suffering lies not with inequality, but with dependence." -Voltaire

"Fallacies do not cease to be fallacies because they become fashions.” -G.K. Chesterton

Re: Why do we need more taxes?

Originally Posted by Squatch347

Right, but of course you couldn't do that since most of those goods would already be final "end" goods right? And I'm not sure who you could continue to extract equity out of the company in this manner without it being automatically defunct. Not to mention you would then incur the cost of filing financial statements.

It doesn't matter if they are end goods or not, at least not under the fair tax. (read below to see me use their explanation to show that). If it did matter, no,they are generally not end goods they are goods needed to make my work such as computers, paper, service subscriptions and so on all of which are used to create the things I do.

The FairTax has several features that make it difficult and very risky for persons to have a scam business in order to purchase items tax free.

The thing of it is, I'm not even talking about a scam business. These days doing business is easy. All you need is an ebay account or a web site and you are selling to an international market anything it is you want to produce. I write game mechanics for instance. I also have a broadcasting business as well as a number of advice services I provide people. I just don't happen to charge for any of those at this time. But I could easily and legitimately do all those things and simply loose money at it in exchange for not having the inputs taxed.

First, in order for any person to purchase items tax free for business purposes, the business has to be a registered seller and possess a registered seller certificate issued by the state sales tax authority. Registered sellers are expected to file monthly or quarterly sales tax returns with the state (depending on sales volume).

A bit of work yes, but not all that difficult to do, especially with modern computer software, the reporting side can be quite easy. But keep in mind my objection is not that some corner person is going to hide all their consumption in their ebay marketplace endeavors, its more that existing companies will encapsulate much of their spending inside of the business such that they take very little salary but instead channel the wealth to themselves as expenses and business to business transactions.

When a business purchases items for business use from a retail vendor, they have to pay the tax on the purchase and take a credit against the tax due on their monthly sales tax return. They must keep invoices/receipts to document what they purchased and the amount of the purchase. They might also make note of the purpose of the purchase on the invoice.

AKA when your business buys retail, you get to deduct it from the taxes you pay so that you aren't ultimately paying the tax on those retail purchases. Unless the business collects no retail sales tax to sell, or fails to hire an accountant, they will never pay retail sales tax.

Under the FairTax, there will be less than 20 million businesses that will be filing sales tax returns and thus subject to the possibility of being audited.

Not if people suddenly start opening businesses. I know I would do so. I do have businesses that are personal, there just isn't much tax benefit for me to fill out paperwork for them so I just take the income on my return directly. But I will agree enforcement is easier to an extent. (audits are already mostly targeted to specific high risk type accounts rather than to every tom dick and harry)

I'm not sure I was clear. That amount they reimburse you for travel is added as gross taxable income to your tax return. So instead of making your salary, you made your salary+reimbursements. So you are taxed on that reimbursement as if it were part of your original income.

Not when you simply have a company credit card that you pay for things with which is how it works everywhere I've worked.

That's a bit simplistic. Think of it this way. I can invest my $100 in two different projects. Project A is a capital investment on a piece of machinery that will begin operating next month expected return of X. Project B is a raw material manufacturer, say a steel mill, that will come online also next month and will have the same expected return, X. Which is a better investment? Currently, both are equally desirable, under a VAT, Project A wins because Project B's IRR is lower.

A. How are their rates of return different? Both are returning value to the investor next month of X. Both are manufacturing capital. At any rate I don't see how a VAT plays into IRR low or high. You don't pay until you realize return on the investment, aka value is added. So far as I know VAT does not tax unrealized capital gains.

You favor short term or immediate pay-off projects over longer term investments.

VAT doesn't care when you realize you profits, whenever it happens you pay a share on it.

How is that different from now except that they will have to bear some of the increased cost when now they bear none?

It isn't that much different at all, that is my point. Taxing the poor will not change poor peoples votes except to resent the party that decided to tax them.

Actually that defeats the purpose of having a separate business entity at all. In your example, whatever it owes, you owe, meaning if the company fails they can take your savings, your house and your retirement.

That is correct, that is the risk of direct ownership. If you want to avoid that risk then you need to separate yourself and at that point the company makes money and pays tax, then you make money and pay tax. If you are separate its not double taxation. You want all the protections of having an isolated corporate entity, and none of the down sides. It doesn't work that way for good reason. Otherwise its just a cop out to avoid financial responsibility. (and sadly it sometimes is still exactly that)

Re: Why do we need more taxes?

Originally Posted by Sigfried

The thing of it is, I'm not even talking about a scam business. These days doing business is easy. All you need is an ebay account or a web site and you are selling to an international market anything it is you want to produce. I write game mechanics for instance. I also have a broadcasting business as well as a number of advice services I provide people. I just don't happen to charge for any of those at this time. But I could easily and legitimately do all those things and simply loose money at it in exchange for not having the inputs taxed.

In which case anything you "bought" for that business would be taxed. Further, since the equity of your company would be consistently negative you wouldn't really be a viable business which would be one hell of a big flag for auditing right?

Originally Posted by Sig

A bit of work yes, but not all that difficult to do, especially with modern computer software, the reporting side can be quite easy. But keep in mind my objection is not that some corner person is going to hide all their consumption in their ebay marketplace endeavors, its more that existing companies will encapsulate much of their spending inside of the business such that they take very little salary but instead channel the wealth to themselves as expenses and business to business transactions.

Which would fail because:

Originally Posted by Sig

AKA when your business buys retail, you get to deduct it from the taxes you pay so that you aren't ultimately paying the tax on those retail purchases. Unless the business collects no retail sales tax to sell, or fails to hire an accountant, they will never pay retail sales tax.

I think you misread that statement.
If I am a business and I buy item X and pay $5 of tax from that purchase. I can then get a $5 credit against the tax I am due to pay to the state from the sales I conduct.

In your model the latter is 0 and so my $5 credit expires and I still paid the $5 tax on the stuff I purchased.

No taxes under your model have been avoided.

Originally Posted by Sig

Not when you simply have a company credit card that you pay for things with which is how it works everywhere I've worked.

As it is for me as well. Your company, must by law translate those reimbursements into your taxable income on your W-2.

Originally Posted by Sig

A. How are their rates of return different? Both are returning value to the investor next month of X.

Because project B, being farther away from the final user of the material has its prices reduced by a higher amount of VAT than the final good assembler. The steel's price must reflect the final good's value, minus everything it already does and minus all the different VATs added on. The final good producer only suffers from the last VAT addition when accounting for return rates.

Originally Posted by Sig

Both are manufacturing capital. At any rate I don't see how a VAT plays into IRR low or high. You don't pay until you realize return on the investment, aka value is added. So far as I know VAT does not tax unrealized capital gains.

An IRR in this case was used to figure out the return on capital to plan which project to fund. Why wouldn't any finance grad worth his salt not include likely tax effects into that model?

Originally Posted by Sig

It isn't that much different at all, that is my point. Taxing the poor will not change poor peoples votes except to resent the party that decided to tax them.

So rather than have them not care at all, I would have them care at least a little. That would at least decrease their marginal propensity to consume by some amount.

Originally Posted by Sig

That is correct, that is the risk of direct ownership. If you want to avoid that risk then you need to separate yourself and at that point the company makes money and pays tax, then you make money and pay tax. If you are separate its not double taxation. You want all the protections of having an isolated corporate entity, and none of the down sides. It doesn't work that way for good reason. Otherwise its just a cop out to avoid financial responsibility. (and sadly it sometimes is still exactly that)

Wait, how is that not double taxation? Returns are taxed when they are made and then again when they are realized (either in capital gains or in personal income). I count that as two.

"Suffering lies not with inequality, but with dependence." -Voltaire

"Fallacies do not cease to be fallacies because they become fashions.” -G.K. Chesterton

Re: Why do we need more taxes?

Originally Posted by Squatch347

In which case anything you "bought" for that business would be taxed. Further, since the equity of your company would be consistently negative you wouldn't really be a viable business which would be one hell of a big flag for auditing right?

No. Lots of businesses aren't that viable or loose money. There is no rule every business must be successful to be called a business.

Which would fail because:
I think you misread that statement.
If I am a business and I buy item X and pay $5 of tax from that purchase. I can then get a $5 credit against the tax I am due to pay to the state from the sales I conduct.

In your model the latter is 0 and so my $5 credit expires and I still paid the $5 tax on the stuff I purchased.

I didn't misread it (but it does contradict my personal example). Yes, if I sell nothing, then I pay no tax and yes, it is true I'd have to find a way to make some sales to offset my business expenses. So I'll concede that its not a great personal tax dodge unless you have a running business of some kind. It remains a great tool for those who own tuning business to bury their personal expenditures into the businesses operating costs and have the taxes covered.

No taxes under your model have been avoided.

Here is the actual model. I'm an executive of a pet-food company. I decide to open an office in Hawaii and so to accommodate my work there I charge my beach house cost as a business expense. Its tax free because its a business expense none the less I gain significant personal benefit from it. This also goes for the corporate jet with leather bucket seats and stewardess that we buy just so I can fly there at a moments notice. All of it tax free, all of it largely for my own enjoyment.

As it is for me as well. Your company, must by law translate those reimbursements into your taxable income on your W-2.

you fully account to your employer for all your business-related expenses,
you received full reimbursement,
you were required to return any excess reimbursement, and
there is no amount reported on your W-2 Form, in box 12 with code “L’,you do not need to show the expenses or the reimbursement on your tax return.

So if your employer directly pays your expenses and is not giving you money for them, then they don't put it on your W-2. If on the other hand there is a kind of back and forth (say they give you a per-diem and you then spend less or more than that) then any reimbursement they give shows on the W-2 and you can deduct the expenses from your income.

I've never had any travel expenses show up on my W-2 as I have always used a company card and reported the expense as company paid.

Because project B, being farther away from the final user of the material has its prices reduced by a higher amount of VAT than the final good assembler.

No, it doesn't work like that. Not if its working properly. Its not like VAT takes a flat % of every transaction and thus the more transactions the more % on the good. It takes value added.

So a good with 6 stops in production is taxed only as much as each step added value. A 1 step good is taxed once on however much value is added. Its the revenue on the trades that is taxed, not the total value of the good.

AKA, if I sell a widgit for $5 to you and I am the originator of the widgit, I pay .5. If you sell the widgit to another guy for $6 you pay .1 (10% of the difference). total tax is $6 if that is the last stop.

The steel's price must reflect the final good's value, minus everything it already does and minus all the different VATs added on. The final good producer only suffers from the last VAT addition when accounting for return rates.

I think you misunderstand how VAT works. (or I do but one of us seems to)

With a 10% VAT:
The manufacturer pays $1.10 ($1 + ($1 × 10%)) for the raw materials, and the seller of the raw materials pays the government $0.10.
The manufacturer charges the retailer $1.32 ($1.20 + ($1.20 × 10%)) and pays the government $0.02 ($0.12 minus $0.10), leaving the same gross margin of $0.20. ($1.32 – $0.02 – $1.10 = $0.20)
The retailer charges the consumer $1.65 ($1.50 + ($1.50 × 10%)) and pays the government $0.03 ($0.15 minus $0.12), leaving the same gross margin of $0.30 ($1.65 – $0.03 – $1.32 = $0.30).
The manufacturer and retailer realize less gross margin from a percentage perspective.
Note that the taxes paid by both the manufacturer and the retailer to the government are 10% of the values added by their respective business practices (e.g. the value added by the manufacturer is $1.20 minus $1.00, thus the tax payable by the manufacturer is ($1.20 - $1.00) × 10% = $0.02).

Wait, how is that not double taxation? Returns are taxed when they are made and then again when they are realized (either in capital gains or in personal income). I count that as two.

Because you aren't the one making the returns in the first case but are in the second case. If you separate your business from your finances, its not your business from a tax perspective, it is its own corporate person that pays its own taxes and then pays you, an outside entity who pays their taxes.

Double the entities that have financial independence, double the tax. Married people don't pay tax for giving money to one another (assuming they file jointly) but un-married couples do. Same principle.

The best solution would be to repeal the Income Tax amendment. If I could pick and choose where my money went(or at least have a say in where it goes), I would be more than willing to pay my taxes, but until that time ALL taxes are pointless and destructive.

@onalandline, you complain about high taxes, yet you support some of the largest expenditures of our tax money. Examples, the military, roads, schools, salary for elected officials.

No taxes are better than low taxes.......

I have not said anything like you are accusing me of. I'm just saying that we do not need to increase taxes. We need to cut spending and use tax money wisely.

Re: Why do we need more taxes?

Originally Posted by onalandline

They would pay a lesser amount. The less you make, the less you pay. I think that is fair. Let's not forget who benefits the most from Uncle Sam.

Fair, sure, practical, not very. It would be practical if we had a more socialist style economy and no one really had to be concerned about basic living needs no matter their income. Otherwise you are trying to take blood from the stones and they just won't give it and instead of free people dependent on the state you have debt prisoners dependent on the state or outlaws depending on how hard you try to bleed said stones.

Honestly I like the idea that everyone pays in, but having been poor myself for a time, there isn't much room for contribution. We already have an economy where if you are working poor, a certain amount of larceny (or charity) and deception is required to maintain the basic cost of living (food, shelter, health, and transportation).

Re: Why do we need more taxes?

Originally Posted by Sigfried

No. Lots of businesses aren't that viable or loose money. There is no rule every business must be successful to be called a business.

True, and when the lose money they are either forced to raise replacement cash or write down the equity value of the company. If a company's liabilities outweigh its assets it is forced into bankruptcy.

Originally Posted by Sig

I didn't misread it (but it does contradict my personal example). Yes, if I sell nothing, then I pay no tax and yes, it is true I'd have to find a way to make some sales to offset my business expenses. So I'll concede that its not a great personal tax dodge unless you have a running business of some kind. It remains a great tool for those who own tuning business to bury their personal expenditures into the businesses operating costs and have the taxes covered.

But it really doesn't, because the example holds even with your Hawaii situation (which I think has several other problems).

I'm assuming you mean that the company buys the beach house for you right? That would of course be detrimental to the owners of the company and would likely violate stewardship laws in most cases. However, lets assume that you are the sole owner.

Under this model my company received a tax credit for the taxes it paid on the house. The house becomes an asset on the books, the mortgage a liability, etc. I get to live in the house, but the company still owns it. Perhaps you can help explain how this is different than the income tax dodge done now? For example, I am the owner of a Pet Food company and I get the company to buy and own the house I live and I take a smaller salary.

There is really no difference between with this between an income tax and a consumption tax so the actual level to which it happens should be affected. Except for the fact that of course a company can be audited by state sales tax authorities to ensure that this is a business expense under applicable law.

you fully account to your employer for all your business-related expenses,
you received full reimbursement,
you were required to return any excess reimbursement, and
there is no amount reported on your W-2 Form, in box 12 with code “L’,you do not need to show the expenses or the reimbursement on your tax return.

So if your employer directly pays your expenses and is not giving you money for them, then they don't put it on your W-2. If on the other hand there is a kind of back and forth (say they give you a per-diem and you then spend less or more than that) then any reimbursement they give shows on the W-2 and you can deduct the expenses from your income.

I've never had any travel expenses show up on my W-2 as I have always used a company card and reported the expense as company paid.

I didn't argue that you had to report them on your tax return, you company must account for them by either claiming they are tax-exempt (IE L code in box 12) or including them in box 1.

The vast bulk of expenses that you are reimbursed for are not deductible under IRS rules (meals, most local transport and entertainment expense, association memberships usually) and must be included under wages. http://www.irs.gov/taxtopics/tc514.html

If your employer reimbursed you or gave you an advance or allowance for your employee business expenses that is treated as paid under an accountable plan, the payment should not be shown on your Form W-2 (PDF) as pay. You do not include the payment in your income, and you may not deduct any of the reimbursed amounts.

To be an accountable plan, your employer's reimbursement or allowance arrangement must include all three of the following rules:

You must have paid or incurred expenses that are deductible while performing services as an employee
You must adequately account to your employer for these expenses within a reasonable time period, and
You must return any excess reimbursement or allowance within a reasonable time period

These rules are discussed in greater detail in Publication 463, Travel, Entertainment, Gift, and Car Expenses.

If your employer's reimbursement arrangement does not meet all three requirements, the payments you receive should be included in the wages shown on your Form W-2.

Originally Posted by Sig

No, it doesn't work like that. Not if its working properly. Its not like VAT takes a flat % of every transaction and thus the more transactions the more % on the good. It takes value added.

So a good with 6 stops in production is taxed only as much as each step added value. A 1 step good is taxed once on however much value is added. Its the revenue on the trades that is taxed, not the total value of the good.

AKA, if I sell a widgit for $5 to you and I am the originator of the widgit, I pay .5. If you sell the widgit to another guy for $6 you pay .1 (10% of the difference). total tax is $6 if that is the last stop.

Wait, how is that different than what I said? Also, why would I perform a step if no value was added?

Lets say your widget is part of a toy that I sell, the amount of revenue I receive due to the widget's contribution to the toy is $6. I pay $5 for it leaving me a 20% return per widget.

Now lets say to produce your widget you buy $4.16 worth of metal per widget. Meaning you too get a 20% return.

This means that in a VAT system I pay $.10 in taxes, you pay $.084 in taxes and all the steps proceeding you pay $.416 in taxes.

So we know that the final value of the widget is $6 which is set by maximizing the price to volume ratio, aka when the marginal revenue of selling another unit equals the marginal cost of producing another unit.

Now unless you widgets are perfectly inelastic or you are a perfect monopolist I will be able to pass along some portion of my taxes along to you. I can do this by either demanding a lower price or by buying less widgets and producing less toys because my marginal revenue is now lower.

But lets say my equity holders take most of the bath and suck up 90% of the VAT taxes.

That would mean that I receive $6.00 in revenue, pay $0.09 in taxes and pay $4.99 in COGS. My return rate has decreased to 18.4%

Lets say you have pretty much the same deal. You are now receiving $4.99 in revenue, paying .0756 in taxes (90%) and are now paying $4.152 in COGS. Your return rate is now 18.3%.

So now we had two businesses which had exactly the same return rate (20%) and were therefore comparable investments and now mine is a better deal than yours.

This is all aside from the VAT's other drawback like being less transparent to consumers, and allowing a greater flexibility for loopholes.

Originally Posted by Sig

I think you misunderstand how VAT works. (or I do but one of us seems to)

The equation below assumes a perfectly inelastic good meaning all the taxes can be passed along to buyers, generally that is not the case.

Originally Posted by Sig

Because you aren't the one making the returns in the first case but are in the second case. If you separate your business from your finances, its not your business from a tax perspective, it is its own corporate person that pays its own taxes and then pays you, an outside entity who pays their taxes.

So if I own 100% of the equity it isn't my business from your perspective? If I own all the equity, those returns are by law and by right mine regardless of whether they are dispensed or not aren't they?

Originally Posted by Sig

Double the entities that have financial independence, double the tax. Married people don't pay tax for giving money to one another (assuming they file jointly) but un-married couples do. Same principle.

This isn't a very good analogy in my opinion because I don't have 100% ownership of my wife if we file separately or my girlfriend if we aren't married. A company can be a separate legal entity, but it can't be unowned, a person can.

"Suffering lies not with inequality, but with dependence." -Voltaire

"Fallacies do not cease to be fallacies because they become fashions.” -G.K. Chesterton

Re: Why do we need more taxes?

Originally Posted by Squatch347

True, and when the lose money they are either forced to raise replacement cash or write down the equity value of the company. If a company's liabilities outweigh its assets it is forced into bankruptcy.

No, not when it is a privately held company. The owners can continue to keep it afloat indefinitely which is what they often do. I have friends who run stores at a loss to offset their other income and because they like running the shops (which are hobby stores). They have other income sources which prop up the store and the store's losses lower their tax rate by putting them in a lower bracket. Because they value the entertainment from having the shop and other benefits (in this case good will from consumers) its more than worth the losses it runs. It is not an uncommon thing to do.

I'm assuming you mean that the company buys the beach house for you right? That would of course be detrimental to the owners of the company and would likely violate stewardship laws in most cases. However, lets assume that you are the sole owner.

Indeed, soul owner is the easy one, but "friend of the board of directors" is also quite common. A system of graft runs around in part of corporate america where execs in one company are board members in another and vice versa such that you scratch my back and I scratch yours.

Under this model my company received a tax credit for the taxes it paid on the house. The house becomes an asset on the books, the mortgage a liability, etc. I get to live in the house, but the company still owns it. Perhaps you can help explain how this is different than the income tax dodge done now? For example, I am the owner of a Pet Food company and I get the company to buy and own the house I live and I take a smaller salary.

Why would you take a salary from a company you own? That's how you get double taxed. Its pretty simple. If you bought the property you would pay tax on it, if the company buys it for your use, they don't pay the tax. Either way, you get use of the house, either way you pay for the house, but in one case you pay tax and the other you don't.

There is really no difference between with this between an income tax and a consumption tax so the actual level to which it happens should be affected. Except for the fact that of course a company can be audited by state sales tax authorities to ensure that this is a business expense under applicable law.

Sort of but currently businesses pay taxes as do individuals so its a game of moving around who pays the tax. One way or another, someone is paying it from the state's perspective. In a system where people pay taxes and businesses don't, you can simply do away with the tax which is far more problematic for the state.

I didn't argue that you had to report them on your tax return, you company must account for them by either claiming they are tax-exempt (IE L code in box 12) or including them in box 1.

That's wrong though. If your company pays your expenses exactly they do not put the expenses on your W-2 in any way shape or form. They report it on their taxes as a business expense and you don't include them on your taxes at all.

It is only if there is an imbalance between your expenses and what they pay you that they must report the expenses on your W-2.

The vast bulk of expenses that you are reimbursed for are not deductible under IRS rules (meals, most local transport and entertainment expense, association memberships usually) and must be included under wages. http://www.irs.gov/taxtopics/tc514.html

You don't seem to be reading it fully. You can only deduct expenses which your company doesn't pay or when your company reports the reimbursements on your W-2. Companies that reimburse you exactly for your reported expenses don't have to put them on your W-2 and you don't claim them as deductions since you didn't actually pay for any of them. Its all in the article you linked and quoted to me. You just arn't getting that there are two ways to handle the situation from a tax perspective.

1. The company exactly pays for all your travel expenses, they put the expenses on their taxes, you do nothing on yours.

2. The company reports any travel compensation made to you on your tax receipt, and you can deduct those expenses (with limits) from your income.

Because of those restrictions, you are far better off tax wise if your company does the former, which is what every company I've ever worked for does. That is also why they are super stickler about filling out expense reports that are precise.

Wait, how is that different than what I said? Also, why would I perform a step if no value was added?

Lets say your widget is part of a toy that I sell, the amount of revenue I receive due to the widget's contribution to the toy is $6. I pay $5 for it leaving me a 20% return per widget.

Now lets say to produce your widget you buy $4.16 worth of metal per widget. Meaning you too get a 20% return.

This means that in a VAT system I pay $.10 in taxes, you pay $.084 in taxes and all the steps proceeding you pay $.416 in taxes.

Correct.

So we know that the final value of the widget is $6 which is set by maximizing the price to volume ratio, aka when the marginal revenue of selling another unit equals the marginal cost of producing another unit.

Sure.

Now unless you widgets are perfectly inelastic or you are a perfect monopolist I will be able to pass along some portion of my taxes along to you. I can do this by either demanding a lower price or by buying less widgets and producing less toys because my marginal revenue is now lower.

Hold up. Who is passing taxes to who? Tax is "paid" by the buyer of the goods in the sense they supply the cash from which the tax is paid. Whatever price anyone wants to pay, the tax is proportional to that. Its always 10% of whatever your price is. If that would knock it out of a being worth producing, then you wouldn't sell them. There is no question any tax pushes down demand for whatever is being taxed. The VAT however can't be gamed by tax shifting like taxes where the tax only comes in on a given type of transaction.

But lets say my equity holders take most of the bath and suck up 90% of the VAT taxes.

How and why would they do that? Why not just say under a sales tax that a business owner makes the equity holders take a bath? It doesn't have anything to do with the structure of the VAT.

That would mean that I receive $6.00 in revenue, pay $0.09 in taxes and pay $4.99 in COGS. My return rate has decreased to 18.4%

What? You lost me somewhere along the line here. You are collecting $6 in the sales price over a 4.99 cost so you are adding value of 1.01 which would be a tax of .101 (not .09) your rate of return is more than 20% before tax (which is how you measured it when you cited 20% above) You pay a bit more tax because you managed to capture more of the added value than the person selling to you.

Lets say you have pretty much the same deal. You are now receiving $4.99 in revenue, paying .0756 in taxes (90%) and are now paying $4.152 in COGS. Your return rate is now 18.3%.

What? The diff between my purchase and sale is .84 so I pay .084 in tax, not .0756. The return on investment is .202 etc or 20% rounded off before tax (which is how you calculated it when it was 20% above)

So now we had two businesses which had exactly the same return rate (20%) and were therefore comparable investments and now mine is a better deal than yours.

No, its not. I have no idea what you were trying to show, but you did the math differently in the two examples for the tax rate. In only you didn't include tax, in the other you did. And then you just came up with numbers that aren't there so far as I can tell.

This is all aside from the VAT's other drawback like being less transparent to consumers, and allowing a greater flexibility for loopholes.

It is not less transparent to consumers. They know that 10% of the price of goods is payed in tax. Simple as that. Loopholes? What is to loophole here? There are certainly a few scams you can run in any tax system but in this case there isn't any real escape from it unless you structure it with one. If you want to earn money selling something, you will pay 10% of the earnings.

The equation below assumes a perfectly inelastic good meaning all the taxes can be passed along to buyers, generally that is not the case.

It does no such thing. It does not compare before and after prices on goods, it only illustrates how the tax is paid. Whatever the difference of cost and sale, that is taxed at a given rate. If you raise or lower prices, you still pay the same tax rate at each and every stage and the end result is still that rate. The end sale price is no different than a 10% sales tax, only the prices in between may be different and so every business must consider tax in pricing, not just end sellers.

Tax is a cost of business. Its what you pay for the shared benefits of the state. There is no good reason some should pay that and some should not or some should account for it and some should not just because the nature of their business is different.

So if I own 100% of the equity it isn't my business from your perspective?

Not if it is a corporation, no. You control it, but it is not yours because you have chosen to make it independent for financial reasons. There are benefits to that and there are things about it that are not beneficial. Incorporating is not a free lunch.

If I own all the equity, those returns are by law and by right mine regardless of whether they are dispensed or not aren't they?

No, they are not. You have the power to transfer them from the company to you, but they are not yours until you do so, they belong to the company. That is how the law works and that is why corporations also protect you from the debts the company may have. For the protection from its woes you are also essentially protected from its gains. You can choose to take on either of those because you control it, but in both cases it is a transfer of wealth or debt and subject to tax.

Go look it up, its how they work.

This isn't a very good analogy in my opinion because I don't have 100% ownership of my wife if we file separately or my girlfriend if we aren't married. A company can be a separate legal entity, but it can't be unowned, a person can.

The mistake you are making here is that ownership is not the defining quality, its entity. You and your wife become a single financial entity for tax purposes even though you do not own one another. In a corporation you may own it, but you are two separate entities for tax purposes (and other purposes as well). Ownership just doesn't enter into the equation in either case.

Re: Why do we need more taxes?

Originally Posted by Sigfried

No, not when it is a privately held company. The owners can continue to keep it afloat indefinitely which is what they often do. I have friends who run stores at a loss to offset their other income and because they like running the shops (which are hobby stores). They have other income sources which prop up the store and the store's losses lower their tax rate by putting them in a lower bracket. Because they value the entertainment from having the shop and other benefits (in this case good will from consumers) its more than worth the losses it runs. It is not an uncommon thing to do.

If this company has legal protection by incorporation or any of those subsets under a state law any party to those assets, including your bank with a checking account can force it into bankruptcy.
If rather your private company has no assets and no bank accounts (I'm not sure how it would then pay for anything for you if it doesn't have a bank account) and no one has any conceivable legal standing to protect themselves from your business in any way perhaps it could then maintain a negative equity for a long time. However, you would still have to file those financial statements and an increasing negative equity would be a pretty red flag for our auditors right?

As for uncommon, that works by taking increasing Liability from the owner in the form of loans or increased equity to counterbalance the gifted assets, that really isn't the situation you are describing though.

Originally Posted by Sig

Indeed, soul owner is the easy one, but "friend of the board of directors" is also quite common. A system of graft runs around in part of corporate america where execs in one company are board members in another and vice versa such that you scratch my back and I scratch yours.

Which would still make them liable to shareholder lawsuits and incredibly prone to takeovers, a la Barbarians at the Gates. Remember that this graft is economically hurtful to the company and means that there is an advantage to someone else coming in and taking over. Especially if this gets out of hand.

Originally Posted by Sig

Why would you take a salary from a company you own? That's how you get double taxed.

How else do you as a sole proprietor get funds to live on?

Originally Posted by Sig

Its pretty simple. If you bought the property you would pay tax on it, if the company buys it for your use, they don't pay the tax. Either way, you get use of the house, either way you pay for the house, but in one case you pay tax and the other you don't.

This isn't true though. If I buy the house, I pay a tax. If they buy the house they pay the tax and then get a credit on future taxes paid to sales they make. There is a big distinction there for audit and protection purposes.

This didn't answer the question though. How is this different than under the current system? Why don't all owners simply get their company to purchase a house for them rather than having to take money out of their company (and having to pay a tax on that) to pay a mortgage?

Originally Posted by Sig

Sort of but currently businesses pay taxes as do individuals so its a game of moving around who pays the tax. One way or another, someone is paying it from the state's perspective. In a system where people pay taxes and businesses don't, you can simply do away with the tax which is far more problematic for the state.

So its better in your opinion to have 150+M potential audit candidates (personal tax payers) rather than 22M? That is more simple? Especially given that the 22+M are already required to complete and file this accounting?

More importantly and to my point, your concern over fraud is a lot easier to deal with on a business level which is required to conform to GAAP standards and file its financial statements quarterly than it is for the 150million US tax payers using dozens of sources of income.

Originally Posted by Sig

That's wrong though. If your company pays your expenses exactly they do not put the expenses on your W-2 in any way shape or form. They report it on their taxes as a business expense and you don't include them on your taxes at all.

Wrong, please read the IRS link I supplied in my last post. It explicitly states that companies are required by law to include your reimbursement in box 1 if all three conditions listed are not met.

Originally Posted by Sig

You don't seem to be reading it fully. You can only deduct expenses which your company doesn't pay or when your company reports the reimbursements on your W-2.

I'm specifically quoting from the IRS here: "If your employer's reimbursement arrangement does not meet all three requirements, the payments you receive should be included in the wages shown on your Form W-2."

Originally Posted by Sig

Companies that reimburse you exactly for your reported expenses don't have to put them on your W-2 and you don't claim them as deductions since you didn't actually pay for any of them.

I'm not sure what document you are reading here. Could you please reference some text that supports your position?

The document seems pretty clear to me, for reimbursements, if they meet all three criteria they do not report it on your W-2, you cannot deduct it.
If however they don't meet all criteria they "should be included in the wages shown on your Form W-2" and you may be able to deduct some of them.

Your company is super anal about your expense forms because they get audited on W-2 production and they have to ensure they report your income to the IRS accurately.

Originally Posted by Sig

Hold up. Who is passing taxes to who? Tax is "paid" by the buyer of the goods in the sense they supply the cash from which the tax is paid. Whatever price anyone wants to pay, the tax is proportional to that. Its always 10% of whatever your price is. If that would knock it out of a being worth producing, then you wouldn't sell them. There is no question any tax pushes down demand for whatever is being taxed. The VAT however can't be gamed by tax shifting like taxes where the tax only comes in on a given type of transaction.

Yeah, and if the effective price of the widgets being produced is raised by 10% then I can reduce that effect on me by either demanding a lower price to offset or reducing the quantity bought. So if the widget you are selling is $5 with a .084 tax and I'm buying 1000. I can either negotiate a reduction in price (in my example by about a penny a widget) or reduce my quantity by about 2 to offset 10% of the tax.

Originally Posted by Sig

How and why would they do that?

By accepting the additional tax as a cut to their net income.

Originally Posted by Sig

Why not just say under a sales tax that a business owner makes the equity holders take a bath?

You do realize that a business owner and an equity holder are the same thing right?

Originally Posted by Sig

It doesn't have anything to do with the structure of the VAT.

You're right its not VAT specific, any additional cost (including income tax) has only two outputs, the equity holders or the consumers.

I'm going to do this part of your response first, hopefully to clear up any confusion as to my scenario:

Originally Posted by Sig

No, its not. I have no idea what you were trying to show, but you did the math differently in the two examples for the tax rate. In only you didn't include tax, in the other you did. And then you just came up with numbers that aren't there so far as I can tell.

To reiterate. Under a no tax system (to highlight how the VAT operates here) we both have a 20% return rate right?
Ok, now for a couple of assumptions.
1) A 10% VAT.
2) Neither the demand for your widget nor the materials you make it from are perfectly inelastic so some of an increased cost is passed along.
3) I've offered a 10% pass along rate, the actual number is irrelevant the relationship is what dictates the outcome.

Ok, given those three assumptions we get the above numbers, which I'll restate here.

I receive $6 in revenue per widget. I pay you $4.99 per widget, you accept a 1 penny decrease per widget (alternatively you could accept a decrease in volume the effect is the same). That extra penny represents 10% of my tax bill (10 cents), I pay the other 9cents out of my gross margin.

You get $4.99 per widget and pay $4.152 per widget, you supplier accepts a $0.0084 cost reduction per widget and you pay 0.0756 in taxes out of your gross margin.

Given those numbers my new return rate is 18.4%, yours is 18.3%.

Originally Posted by Sig

What? You lost me somewhere along the line here. You are collecting $6 in the sales price over a 4.99 cost so you are adding value of 1.01 which would be a tax of .101 (not .09).

I was doing a bit of short hand, the drop of a penny in price is because you are accepting a penny reduction in price to help offset the addition of cost in tax form. IE the VAT added 10 cents to my bottom line cost per widget. 9 cents of that cost is going towards my equity holders as a NI loss, the other 1 cent is being passed along to my supplier in the form of a price decrease.

Originally Posted by Sig

your rate of return is more than 20% before tax (which is how you measured it when you cited 20% above)

I didn't calculate it before tax last time, I calculated it in exclusion of tax to highlight the difference

Originally Posted by Sig

What? The diff between my purchase and sale is .84 so I pay .084 in tax, not .0756. The return on investment is .202 etc or 20% rounded off before tax (which is how you calculated it when it was 20% above)

The 0.0756 is 90% of your tax bill, you too pass along 10% of your tax bill to your supplier in the form of decreased prices or decreased volume.

Originally Posted by Sig

It is not less transparent to consumers. They know that 10% of the price of goods is payed in tax. Simple as that. Loopholes? What is to loophole here? There are certainly a few scams you can run in any tax system but in this case there isn't any real escape from it unless you structure it with one. If you want to earn money selling something, you will pay 10% of the earnings.

But it isn't just 10% of that good that reflects the taxes is it? There are taxes all along the value chain that they don't see, that they have no idea about. Under the FairTax, all tax, period is labelled on the receipt during purchase.
As for loopholes, lets look at where VAT taxes are common, you'll find that there are lower rates for "domestic" industries, union supported industries and furloughs for companies that are partially government owned.

Originally Posted by Sig

It does no such thing.

So you are saying that a full assumption of the cost of tax has nothing to do with the good's elasticity of demand?

Originally Posted by Sig

Tax is a cost of business. Its what you pay for the shared benefits of the state. There is no good reason some should pay that and some should not or some should account for it and some should not just because the nature of their business is different.

Because businesses aren't real Sig, they are simply legal fictions to facilitate contracting.

Originally Posted by Sig

Not if it is a corporation, no. You control it, but it is not yours because you have chosen to make it independent for financial reasons. There are benefits to that and there are things about it that are not beneficial. Incorporating is not a free lunch.

Ok, I'm going to need some support for this. Please support that if you own 100% of something that it isn't yours.

Originally Posted by Sig

No, they are not. You have the power to transfer them from the company to you, but they are not yours until you do so, they belong to the company. That is how the law works and that is why corporations also protect you from the debts the company may have. For the protection from its woes you are also essentially protected from its gains. You can choose to take on either of those because you control it, but in both cases it is a transfer of wealth or debt and subject to tax.

Go look it up, its how they work.

I can dispense the funds in any way I like, sell the assets, liquidate the company, how is that not mine?

Originally Posted by Sig

The mistake you are making here is that ownership is not the defining quality, its entity. You and your wife become a single financial entity for tax purposes even though you do not own one another. In a corporation you may own it, but you are two separate entities for tax purposes (and other purposes as well). Ownership just doesn't enter into the equation in either case.

Returning to your original point though about double taxation, there is a huge difference between an actual person, who can dispense their income in any way they wish, and a company which is controlled by the shareholders. Entity is not the issue at all, ownership of capital is. That equity that exists on the books is not the company's, it is legally and morally the property of the shareholders. The assets are theirs by ownership, regardless of limited liability legally, it is still theirs.

Last edited by Squatch347; April 18th, 2012 at 07:26 AM.

"Suffering lies not with inequality, but with dependence." -Voltaire

"Fallacies do not cease to be fallacies because they become fashions.” -G.K. Chesterton

Re: Why do we need more taxes?

Originally Posted by Sigfried

Fair, sure, practical, not very. It would be practical if we had a more socialist style economy and no one really had to be concerned about basic living needs no matter their income. Otherwise you are trying to take blood from the stones and they just won't give it and instead of free people dependent on the state you have debt prisoners dependent on the state or outlaws depending on how hard you try to bleed said stones.

Honestly I like the idea that everyone pays in, but having been poor myself for a time, there isn't much room for contribution. We already have an economy where if you are working poor, a certain amount of larceny (or charity) and deception is required to maintain the basic cost of living (food, shelter, health, and transportation).

If the federal government would stay within the bounds of the Constitution, there would not be a problem right now. We could eliminate several unnecessary departments to start with, such as the Department of Education, the Department of Housing and Urban Development, the Department of Energy, among others. Cut out subsidies. Cut out redundancy and waste. We know that there is a lot of that. It's certainly a monumental task that requires brave people to accomplish it. The fact remains that taxes are not the answer.

Re: Why do we need more taxes?

Originally Posted by onalandline

I certainly wouldn't take the socialistic route.

I know, which is why the conservative political philosophy is so incoherent sometimes. Taking money from the poor has been done, we call it oppression and despotism and generally reject the notion. Its far better to use charity to try and elevate the poor out of poverty so they can contribute. A few of them just aren't capable or willing and those you just find the most expedient way to deal with.

Now I can see if you want to tax the poor for some other resource they have in lieu of cash. Some of them certainly have time so they could do some work for others, or they may be able to be organ donors for some consideration or perhaps. I don't feel like they should simply have no responsibility. But asking money from someone who doesn't have it or barely has enough to operate in society is pointless as you will just have to give it back to them or watch them sink into a downward spiral.

(Keep in mind the kind of tax I'm promoting in this thread actually does tax the poor as much as anyone else, but it does so simply within the price of goods in general so you are not asking for cash from them directly.)

Again, I'm OK with some kind of token tax, and I'd love to see some kind of volunteer credit you could get if you were poor where you could pay tax in such work, but even that would have a price to it. And when it comes to the ultra lazy/disabled, I think bribery/support is simply the most expedient way to deal with them. For the actively destructive, you have to simply weigh the costs of letting them run about and fixing the damage with locking them up. It really depends on how destructive they are.

I guess I'm just trying to say you have to temper that political philosophy with pragmatism if you want to do more than cause conflict. If you are looking for class warfare... OK, that's what you will end up with. And I'd make the same critique of any liberal saying "soak the rich!" I think rich people are generally very productive and useful people and you need to have them to enjoy the fruits of their labors. But I will say that with great power should come responsibility so I would look to the wealthy to help contribute in kind to their wealth to the good of the nation that defends it.

If this company has legal protection by incorporation or any of those subsets under a state law any party to those assets, including your bank with a checking account can force it into bankruptcy.

But its not, that is the point of owning the business yourself. You keep confusing the notion of a wholly owned corporation with a privately owned business aka soul proprietorship. The example I was explaining here was not incorporated.

If rather your private company has no assets and no bank accounts (I'm not sure how it would then pay for anything for you if it doesn't have a bank account) and no one has any conceivable legal standing to protect themselves from your business in any way perhaps it could then maintain a negative equity for a long time. However, you would still have to file those financial statements and an increasing negative equity would be a pretty red flag for our auditors right?

No, its just your business. Look, I can and do operate a small business where its bank account is my bank account. Any money I make can be used on the business, and any money the business makes can be spent by me on D&D books or whatever I like. I am the business, the business is me. That is how sole proprietorship works. It can loose money all day long so long as I have other income to keep it afloat and I deduct its losses from my income tax. I don't file one for the business and one for me. (state taxes tend to be different in that regard) Its not a red flag unless they think I am somehow hiding the income the company is making or as we are discussing they think the business is some kind of front that doesn't really do any commerce. I can't open a wholesaler that only I buy goods from for instance, but If I operate a law office that takes cases pro bono more often than not, its still a legit business.

Which would still make them liable to shareholder lawsuits and incredibly prone to takeovers, a la Barbarians at the Gates.

Only if it is publicly traded and only if they get caught doing it. It certainly happens, but it also goes un-caught for some good long periods of time. Look how long Kodak managed to hide billions in losses for instance. That wasn't a graft situation but it shows how hard it can be to penetrate a well orcastrated scam in a large public corporation and in those cases the individuals make out like bandits and don't really care that the company crashes and burns.

My wife was at a place that had private shares their employees could by. My wife wisely refused to spend her money on them. When it came time to sell the company, instead of selling the company shares at the sale price value, the owners negotiated a very low sale price, and multi million dollar bonuses for themselves. The employees all lost money on their investments and the execs walked away millionaires. Totally legal, and totally crooked.

Remember that this graft is economically hurtful to the company and means that there is an advantage to someone else coming in and taking over. Especially if this gets out of hand.

Thing of it is, with larger companies they just suck up the profits and the business runs relatively fine. Some day its competition may beat it, but not before the grafters have stocked up their bank accounts and retired to Florida. There are serious problems with the way corporate america does business that fly in the face of what should be the rational incentives for good decision making.

How else do you as a sole proprietor get funds to live on?

A sole proprietor does not need to actually transfer funds because the business finances and their finances are one in the same.
A person that owns 100% of a corporation (which is what I think you are getting at)...
Either
1. Has another source of income (often but not always)
2. Takes the tax hit for the corp paying him money.

People who want to live off their business income tend to own the business directly. Once you have earned some wealth, that's when you tend to make the company a corporation or when you get into the company starting business. Most who do that then make money on equity gains. They build up the company and sell it to others and take profit from that (and pay tax on it). The tax hit is worth the reduced risk exposure especially when they tend to be using corporate loans to finance the company.

When you run a company and have little reason to sell it, often you just keep it privately held to avoid the "double" taxation. There are some very large privately held companies out there.

This isn't true though. If I buy the house, I pay a tax. If they buy the house they pay the tax and then get a credit on future taxes paid to sales they make. There is a big distinction there for audit and protection purposes.

Not that bit so long as they sell something as valuable as the house. On the balance sheet they are not paying that tax in net.

This didn't answer the question though. How is this different than under the current system? Why don't all owners simply get their company to purchase a house for them rather than having to take money out of their company (and having to pay a tax on that) to pay a mortgage?

Don't get me wrong, they often do. Sometimes legally, sometimes not. Thing of it s though, we don't have a national sales or real-estate tax so the house thing is an income offset and not always easily applicable.

So its better in your opinion to have 150+M potential audit candidates (personal tax payers) rather than 22M? That is more simple? Especially given that the 22+M are already required to complete and file this accounting?

They don't lottery audits. They have sophisticated computer models that pick out who to audit based on "red flags" as you say. I can process 150 million records as easily as 22 million on my computer to flag potential audits. These days that kind of scale, so long as you can automate it, is not challenging.

More importantly and to my point, your concern over fraud is a lot easier to deal with on a business level which is required to conform to GAAP standards and file its financial statements quarterly than it is for the 150million US tax payers using dozens of sources of income.

True. But my alternate proposal both reduces the number of filings and protects against such fraud, its win-win.

Wrong, please read the IRS link I supplied in my last post. It explicitly states that companies are required by law to include your reimbursement in box 1 if all three conditions listed are not met.

IF

See above for giant "if". If those conditions are not met you are correct. But many companies meet all those conditions and thus they do not put it there and you do not include it in your taxes.

I'm specifically quoting from the IRS here: "If your employer's reimbursement arrangement does not meet all three requirements, the payments you receive should be included in the wages shown on your Form W-2."

Again IF IF IF.

I'm not sure what document you are reading here. Could you please reference some text that supports your position?

The same one you are. I just seem to get the whole IF part where there are two ways to handle the taxes. One of them completely moves all expense accounting into the company while the other moves it all to the employee. If you want to hide personal expenses in company expenses you would do it the former way.

The document seems pretty clear to me, for reimbursements, if they meet all three criteria they do not report it on your W-2, you cannot deduct it.

Meeting the requirements is what you do then. All those are is you account the expenses and pay for them exactly. Its not hard to do.

Yeah, and if the effective price of the widgets being produced is raised by 10% then I can reduce that effect on me by either demanding a lower price to offset or reducing the quantity bought.

No, you still pay 10% of whatever price or quantity you negotiate. Its always 10%, you can't change that.

So if the widget you are selling is $5 with a .084 tax and I'm buying 1000. I can either negotiate a reduction in price (in my example by about a penny a widget) or reduce my quantity by about 2 to offset 10% of the tax.

No, you pay 10% no matter what. The absolute tax will change, but the rate of tax won't.

By accepting the additional tax as a cut to their net income.

You can't transfer your tax liability to others, you have to pay it yourself so you always pay 10% on whatever it is you buy/sell.

You do realize that a business owner and an equity holder are the same thing right?

They can be but they are not necessarily. I own my house, my bank is an equity holder. They do not legally own it. If I default on my loan obligation they can move to take it away from me, but they don't own it at all. You can do the same with a business. Often equity holders in companies do not have any ownership or control rights on the business. They simply have some kind of equity contract.

You're right its not VAT specific, any additional cost (including income tax) has only two outputs, the equity holders or the consumers.

Great, so lets not muddle the discussion with that.

To reiterate. Under a no tax system (to highlight how the VAT operates here) we both have a 20% return rate right?

Sure.

Ok, now for a couple of assumptions.
1) A 10% VAT.
2) Neither the demand for your widget nor the materials you make it from are perfectly inelastic so some of an increased cost is passed along.

The increase in cost is 10%, that is known in this scenario. This would change the equilibrium by modifying the supply curve at all points along the chain of production. Each stage of production may have a different slope due to elasticity or other factors.

3) I've offered a 10% pass along rate, the actual number is irrelevant the relationship is what dictates the outcome.

This whole "pass along rate" business is what isn't making sense. Each producer doesn't just "take it on the chin" from one other producer unless they agree to. Each will set a price based on their supply curve and the demand curve of the product consumer. No one point in the chain gets to dictate to the others unless you introduce some limit in the model like a monopoly or some such.

I receive $6 in revenue per widget. I pay you $4.99 per widget, you accept a 1 penny decrease per widget (alternatively you could accept a decrease in volume the effect is the same). That extra penny represents 10% of my tax bill (10 cents), I pay the other 9cents out of my gross margin.

It doesn't work that way. You don't take 1 cent out of your tax, you take .o1 cent out of your tax. The tax is always 10% on the difference. Just because you somehow managed to squeeze your supplier for an extra penny, does not mean you changed your tax rate. you could have squeezed them pre-tax too. nothing about the tax gives you extra leverage on your supplier. you are introducing a non consequential change into this model and calling it a unnecessary consequence of the tax. You have not shown that this price shift is due to the tax other than asserting it is.

Lets say you demanded to pay 4.90 and got your whole 10 cents more on the deal. You are still paying a tax, you just have more profit to pay it from. You could have done that just as easily pre-tax and gotten 10 cents free and clear. AKA you aren't actually justifying the price shift in any economic sense, just arbitrarily sticking it in there and calling it a reaction to the tax.

The raw material guy could just say "f-u" I'll sell to the folks who are offering $5 thanks very much.

Ignoring the rest because it rests on an unfounded premise.

So you are saying that a full assumption of the cost of tax has nothing to do with the good's elasticity of demand?

No I'm saying you can't just arbitrarily shift the cost burden around like that without justification. Unless the elasticity is different for each step in the chain, the price will vary about equally in each step of the chain. But elasticity here is a bit special....

Lets say for raw materials you could use iron or copper in your widget. This creates elasticity because if the price for one goes up, the demand goes down since you have an alternate good. But.... if both iron and copper producers are paying VAT equally, then the alternate good effect on elasticity is negated entirely.

The other source of elasticity tends to be only on the final good. An elastic final good will have any demand shifts carry down the chain of production at each step with a reduced demand, meaning the prices for nearly all the chains of production will go down. Similarly if it is very inelastic, then all the suppliers of the good can equally demand higher price. So long as the tax is applied evenly as proposed, then elasticity will tend to be equal for all parts of the production chain with respect to the rate of tax.

Because businesses aren't real Sig, they are simply legal fictions to facilitate contracting.

Tax is also a legal fiction if you are going down that road. So is government. One begets the others.

Ok, I'm going to need some support for this. Please support that if you own 100% of something that it isn't yours.

A corporation is a separate legal entity
A corporation is a legal entity that is recognized in the eyes of the law. That is extremely significant, because as a legally recognized entity a corporation has certain rights, such as the right to own property, to open and maintain bank accounts, to hire employees, to protect its rights in court, and so on. With these rights corporations also have responsibilities, such as the responsibility to pay taxes and to otherwise operate within the law. Finally, a corporation’s ongoing status as a separate legal entity is not automatic. The owners of corporations must make annual filings, pay fees, and follow certain legal formalities.

You own the company, but the company owns its assets. It is a "person" under the law. Its as if you owned a slave and the slave owned property. You may control the slave, but his property is not yours. If you want to make it your property, you can command that, but then the state takes tax on it.

I can dispense the funds in any way I like, sell the assets, liquidate the company, how is that not mine?

Its yours, but it is not you. Its property belongs to it, not to you directly. The corporation is an intermediary party.

Returning to your original point though about double taxation, there is a huge difference between an actual person, who can dispense their income in any way they wish, and a company which is controlled by the shareholders.

Not with respect to tax law. You know the whole "corporations are legal persons thing?" Well that exists so that they can be taxed in this way. (and the people who want to get rid of that really don't comprehend what they are doing)

Entity is not the issue at all, ownership of capital is.

That is a misconception you hold. Entity is everything here. The corporation has an independent identity. That is what lets it be traded only on the value of its shares rather than its individual assets and what protects its owners from its liabilities and what means any transfers it makes are taxable as income to the recipients. It has an identity as a legal person (though not a human person). In this sense corporate ownership is slavery.

That equity that exists on the books is not the company's, it is legally and morally the property of the shareholders.

That is wrong.

The assets are theirs by ownership, regardless of limited liability legally, it is still theirs.

As is this. The corporation owns the assets, the corporation can sell them. Even if you, the owner are commanding it, the corporation is the entity doing it. It is not you. Just like if I decided to obey your every word and be your very own Sig, you could command me to give you all my stuff without any opposition, but that doesn't mean it was your stuff, it just means you have the power to suddenly make it your stuff. So long as I still have it, its my stuff. When I move it to you, we are moving the ownership of the stuff. Why or how doesn't matter at all.

The existence of a corporation requires a special legal framework and body of law that specifically grants the corporation legal personality, and typically views a corporation as a fictional person, a legal person, or a moral person (as opposed to a natural person). Corporate statutes typically empower corporations to own property, sign binding contracts, and pay taxes in a capacity separate from that of its shareholders (who are sometimes referred to as "members"). According to Lord Chancellor Haldane,
...a corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation.
—[22]
The legal personality has two economic implications. First it grants creditors (as opposed to shareholders or employees) priority over the corporate assets upon liquidation. Second, corporate assets cannot be withdrawn by its shareholders, nor can the assets of the firm be taken by personal creditors of its shareholders. The second feature requires special legislation and a special legal framework, as it cannot be reproduced via standard contract law.[23]